Demonetisation and its effect on Indian economy
No study on effect of withdrawal of legal tender character of the Specified Bank Notes (SBNs) on Indian economy has been published by the Government. This was stated by the Union Minister of State for Finance Shri Pankaj Chaudhary in a written reply to a question in Rajya Sabha today. Certain studies on related matter has been published by RBI which are available on the website of RBI, the Minister added.
Withdrawal of legal tender character of the SBNs vide Notification S.O. 3407(E) dated 8th November, 2016, inter alia, led to detection of black money, increase in tax collection and widening of tax base.
During the period November 2016 to March 2017, the Income-tax Department conducted search and seizure actions in 900 groups leading to seizure of ₹900 crores, including cash of ₹636 crore and admission of undisclosed income of about ₹7,961 crore.
There was transfer of funds into formal channels due to significant improvement in tax compliance:
- Growth rate of 18% for F.Y. 2017-18 in net direct tax collections over F.Y.2016-17, which was highest in the preceding seven financial years.
- In 2017-18, Personal Income-tax (PIT) Advance Tax collections increased by 23.4% and PIT Self-Assessment Tax by 29.2% over those for F.Y. 2016-17.
A growth rate of 25% in the number of Income Tax Returns (ITRs) filed with the Income-tax Department during F.Y. 2017-18, the highest rate achieved in the preceding five years.
The new ITR filers was about 1 crore 7 lakh as compared to 85.51 lakh during F.Y. 2016-17. In earlier years, the number of new filers was between 50 lakh and 66 lakh.
A growth rate of 17.2% was achieved in the number of returns filed by corporate tax payers during F.Y. 2017-18. It was more than 5 times the growth rate of 3% in F.Y. 2016-17 and 3.5% in F.Y. 2015-16.